Press Release

Basic Needs Basket

JUBILEE - ZAMBIA REFLECTS ON 2006 NATIONAL BUDGET, CALLS FOR PEOPLE CENTRED 2007 BUDGET

“Good intentions in the 2006 National budget have not translated into positive actions to uplift the living standards of the majority Zambians, who are poor,” says Jubilee-Zambia, the Debt cancellation movement of the Jesuit Centre for Theological Reflection (JCTR). The 2007 budget must therefore aim to double the productive capacity of Zambian small scale farmers, manufactures and traders, it adds.

Macro Economic Performance and Poverty Situation

Government has not fully met the 2006 national budget goal announced by the Minister of Finance and National Planning at the beginning of the year to promote broad based participation in economic activities and equitable wealth creation” says Muyatwa Sitali Project Assistant of Jubilee Zambia at the JCTR. Despite the economy having registered positive economic outlook in terms of   economic growth rates, inflation and debt relief and a surge in copper exports, the majority of Zambians including small scale farmers, teachers and nurses have remained poor. This is evidenced by the JCTR Basic Needs Basket that averaged at K1400000 throughout the year, continued to be well beyond the reach of the many Zambians that include teachers, nurses, and security guards, secretaries in the government and some farm workers.  

This year’s budget as well as the Medium Term Expenditure Framework (METF) for 2007-2009 proposes a GDP of 6 %. Sitali adds that “The growth rate indicated in this year’s budget as well as in the MTEF for 2007-2009 is   far below the Zambia’s potential and the growth rate needed to make a dent on poverty and attain the Millennium Development Goals (MDGs).  A number of studies on MDGs have repeated that we need  we need at least at least 7%  GDP  growth rate  to attain the MDGs. Sitali adds that “given Zambia’s natural resource endowment and potential it is disappointing to note  the MTEF  lacks an ambitious  and systematic strategy for the country to attain  a higher economic growth rate.”

Trade Performance

Government’s ambition of an export led growth in 2006 was adversely affected by a highly volatile exchange rate that eroded export earnings of exporters of   non- traditional exporters and consequently destabilizing jobs in the sector. There has not been mitigation to those that were badly affected by this development.  In 2007 and beyond, government needs not to take “on looking” approach to such shocks” says Muyatwa Sitali, Jubilee Zambia.  The economy has experienced consistent trade deficits with a negative balance of K171, 187 million as at the end of October 2006. Trade deficits have been in part as a result of Zambia’s failure to increase export volumes of finished products. The marked decline of exports to potential markets like the Democratic Republic of Congo, Tanzania continues to be of concern. The appreciation of the kwacha further lead to deficits in the national budget  as pledges made by donors for budget support were eroded, this negatively impacted public service delivery.

JCTR has observed the lack of haste in government addressing constraints in domestic trade.  Sitali further urges the government to allocate resources to support the productive capacities of people especially those in small scale agriculture, manufacturing and trading.  “We applaud the fertilizer and seed support programmes role as safety net, however, farmers need holistic  support  measures to produce more and high quality exportable products. “Governments need to stimulate and support a Micro Small, Medium Enterprise (MSME) revolution. This means implementation of combination of strategic measures and incentives that should be reflected as high priorities starting in the 2007 national budget. That is,  do more targeting in  building transport and storage infrastructure,  ensure sustained and  meaningful access to finance, land and technology  for small scale producers and provide reliable  and cost effective energy sources that will encourage long term investments.  The government needs to invest more in promotion value addition, elimination of livestock diseases, upgrade of standards of locally produced goods, extension and advisory services and ensure national and international market linkages are strengthened and created where they don’t exist.  Having enabled a good macro economic environment, government’s role in the performance of the economy will be assessed in 2007 largely by its commitment to provide and facilitate solutions to micro level economic problems that affect smaller producers and traders. In addition international trade negotiations such as the EPA and WTO- Doha negotiations which government will participate in should ensure that the conditions of Zambian small scale producers and manufactures are protected if our development path is not to be further interrupted.

Debt, Taxation and the Social Sectors

Despite massive debt forgiveness Jubilee- Zambia is saddened to note that while the 2006 budget mentioned the debt Reform Plan, which is a component of, the Public Expenditure Management and Financial Accountability (PEMFA) reforms, has not been fully implemented and will not be fully operational by end of this year. The JCTR is concerned about the consequence of delaying the complete implementation of the Debt Reform plan and subsequently the debt policy. The silence over the adoption of the Republican Constitution has increased our concern over the current weaknesses in the system of government’s contraction and management of foreign loans which overlooks the oversight of parliament in important financial agreements.

Part of the goal of promoting Debt cancellation, was to ensure sufficient resources are available to employ more teachers and health workers. Preliminary information shows that this has been partly done as some teachers were employed in the latter half of the year. While the number of teachers is still a major concern, the problem in the education sector includes the lack of incentives to ensure their retention because of low wages and inadequate teaching aids. Furthermore, the poor continue to be challenged because of the indirect costs to access “free education” such as the cost of uniforms, PTA project fees, private tuition fees, etc. We urge the government to demonstrate improve rove conditions of service of Teachers and provide incentives and tools that will promote their retention. In health, we urge government to ensure adequate provision of all materials, equipment and medicines and well motivated staff

Sitali further notes that “Debt relief at the beginning and middle of the year reduced the debt stock to US$502 million. However the benefits stipulated on paper and promises made during the tightening of belts or sacrificing period cannot be experienced by the people partly because of a high tax regime.” It is unacceptable that in a country characterized by wide spread poverty; labour contributes five times more   to government revenue through high Pay as You Earn (PAYE) than employers through company tax payers. These are anomalies which should be corrected with a progressive tax regime; the high taxes have contributed to the increase in informal business and labour. Certainly, the proposals made by the IMF if implemented are likely to   worsen food insecurity and will promote all kinds of labour and business informality relations that will take us twenty years backwards, thus will totally undermine existing social justice concerns.

We are also concerned about the lack of speed in addressing high domestic debt owed to contractors, suppliers and pensioners. Government needs to quickly dismantle this debt which at the beginning of the year was well over ZMK 6 trillion which continues to stifle economic activity. We also note that the allocations in the 2007-2009 Medium Term Expenditure Framework are insufficient to meaningfully unlock economic activity tied by the domestic debt.  We propose an increase in resources to dismantle domestic debt and urge government to reduce its appetite for both domestic and foreign debt. Government should limit external borrowing to support profitable investments that support economic activities and not public sector consumption.

We call upon the donor community, especially the International Monetary Fund and its sister the World Bank to desist from imposing conditionalities and economic reforms such as tax prescriptions whose combined impact would stifle long terms prospects for development and worsen the poverty situation in our highly impoverished country.

In 2007, Government’s commitment demonstrated by an ambitious growth rate driven by resolution of micro-economic constraints, a well balanced tax regime, and increases in allocations to the social and key economic sectors will be the necessary pre- requisite for integral and fuller human development.

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